A joint property venture is an arrangement between parties like builders, financiers, developers, or non-professionals, all of whom are looking to get involved in real estate. Many joint ventures consist of a partner contributing the funds or financing, with the other partner contributing their sweat equity in remaking the property, but these divides aren’t always so clean!
Getting involved in joint venture opportunities is pretty easy, too! There are three quick, easy steps you can take for joining one.
Step #1: Identify your opportunities
Joint venture opportunities come in many forms, but for our purposes, we’re going to separate them from companies like real estate investment trusts, which don’t require anything more than funds. Joint ventures often start with little more than a conversation, and this is a great way for you to evaluate potential partners and opportunities.
Many people with property investments talk up their properties to get people interested in joining their venture. While it’s a good tactic for gauging interest, if you’re on the receiving end of this conversation, don’t be afraid to respond just as eagerly. Ask questions about the opportunity and see if they have any documents to share. It might be that they don’t have a business plan yet, but can show you the property, the surrounding community, and explain why it will work.
If you’re not a magnet for flipping-types, you can approach a property investment company or someone in the business on your own.
Step #2: Evaluate your opportunities
While they can take on different legal structures, joint ventures aren’t always very formal agreements – they can be decided on something as small as a handshake. It’s important to get serious answers and review the opportunity before shaking any hands on financial or work commitments! A joint property venture should:
- Recognize the contributions and expectations of each partner
- Be clear and realistic about the results and achievements
- Give clear measurements and parameters on percentage splits and interest rates
You should be happy with all three aspects before getting involved, and if you are, get the terms in writing. It’s nothing personal – just a good way of protecting everyone’s financial interests.
One way to evaluate the opportunity is to make a business strategy or review the strategy of your potential partners before committing time and money to a joint venture. This should help you define what you can realistically expect and better understand what each partner needs to bring to the table.
Step #3: Know your place in the plan of attack before starting
While joint ventures are sometimes called “partnerships,” they are much more. While the parties share the risks and rewards, the venture can become an entity that is separate from other business interests. Is this an agreement between two people looking to make some extra income from property flipping? Or will it require some more structure for resource and tax purposes?
All the cards should be on the table when getting involved in a joint property venture. If your place is more than just financial, don’t be afraid to work on the preparation and remodelling. If you’re comfortable with the parties in this venture (and you should be!), get right into the planning!